When we talk about remaining drilling inventory, what we’re really talking about is remaining hydrocarbon reserves that can be economically extracted. Whereas the gigantic Ghawar oilfield in Saudi Arabia is likely to keep producing for decades thanks to high porosity rock that hasn’t seen a second life yet from enhanced oil recovery, the sharp decline of shale wells and the inherent challenge of marrying EOR to the rock limit production lifespan. Once a drilling spacing unit has been drilled, don’t expect operators to return.
Needless to say, understanding what is left to be drilled, where it is and who is likely to drill it is top of mind for E&Ps and investors, but traditional calculations may overestimate as much as 50%. That’s because acreage math was developed decades ago for conventional vertical wells and fails to account for today’s complex cube style development, parent/child wells, shale geology and 2+ mile lateral length.
We’re in the midst of an unprecedented land rush for remaining drilling inventory. Nowhere is this more apparent than the steady flow of mergers and acquisitions. Hard to imagine now, but the PUD assets of M&A transactions had little or no value during the low points of 2020 yet have rebounded 183% since on a dollar per flowing barrel basis. Recent mega-mergers also indicate that this land rush is strategic to the buyer’s development strategy where only accretive PUD assets are acquired. And it appears that it’s the publicly traded E&Ps who close mergers with stock transactions that are the driving force as only 15% of large private E&Ps were in 2023’s M&A deal flow even though they produce 38% of the country’s energy and have great acreage worth acquiring.
Whether you’re on an acquisition team for an E&P or an investor analyst, understanding what remaining inventory is worth acquiring is more important than ever. Not all PUD assets are created equal, which is why we need better acreage math that can scale across multiple basins and diverse acreage positions, incorporates robust production models and degradation analysis, and overcomes the timing issues that make it difficult to acquire assets.
Teams need confident answers to tough questions about efficiently deploying capital into remaining inventory:
- How much will the wells of the future cost in order to optimize go-forward capital efficiency?
- What existing assets can be high graded and where can assets be acquired that best complement a portfolio?
- What is the best approach to integrate assets post-M&A, apply and optimize new development strategies?
- Are there any physical or labor constraints that prevent site construction or any midstream takeaway issues?
- Are there any lease/obligation issues from continuous drilling clauses that divert development from tier 1 to tier 2?
- Does the asset have any emissions or plug and abandonment liabilities that will impede development plans?
With the introduction of Placed Well Analytics, Enverus delivered high confidence insights to assess the impact of remaining PUD inventory on future energy industry investment, operations and commodity supply. While this Enverus PRISM® dataset plays an important role in quickly screening for potential drilling sites that have not yet been permitted based on engineering and geological models, we recognized that there was also a need for flexibility to adjust the underlying placed well assumptions and incorporate evolving trends into a go forward development plan. And thus, Placed Well Studio was born.
The game changer with Placed Well Studio is rapid customization. From PRISM, users can adjust the assumptions that generate placed well location and well design, including intervals, lateral length, spacing and co-completion to find assets that are most accretive to operator development. Importantly, the results are not generated at the individual well level and instead consider the overall resource capture strategy at the section or unit level.
Placed Well Studio confidently answers the tough questions about where top tier drilling inventory is located. It considers factors such as breakeven prices and DSU design tailored to the actual site’s physical constraints (e.g., slope and inaccessible locations). Compare and contrast any PRISM dataset to filter on the best opportunities or bring your own data into PRISM (e.g., geological interpretations).
Because of the rapid-fire customization and placed well calculations, the door is now open for PRISM users to try different “what if” scenarios around remaining inventory and capital allocation. Amidst today’s land rush for PUD assets, the ability of Placed Well Studio to accurately put a value on the upside potential of undrilled acreage based on conservative, moderate or aggressive assumptions gives E&Ps and investors the data-driven insights needed to inform and anticipate go forward development strategies. Without such a nuanced approach to deepen our understanding of remaining PUD inventory, teams are left with outdated acreage math and a shot in the dark.
